In one of the biggest deals in the information technology-business process outsourcing (IT-BPO) space in recent times, private equity firm Bain Capital Partners has agreed to purchase a 30% stake in the country?s largest BPO Genpact for $1 billion. The deal is the biggest after iGate acquired Patni Computers for $1.2 billion last year.
South Asia Private Investments and other affiliates of Bain Capital are buying approximately 68 million Genpact shares from General Atlantic (GA) and Oak Hill Capital Partners for $14.76 per share. The two have been lead investors in Genpact since 2004 following their acquisition of the BPO from General Electric and have been considering an exit for quite some time.
The transaction will close within the current calendar year after payment of the special dividend of $2.24 per share to all shareholders announced by Genpact on Thursday, including GA and Oak Hill Capital.
?Bain Capital has a long-term perspective, which is critical to building value, particularly in a company like ours. Bain Capital?s decision to invest in Genpact is a vote of confidence in the company and our business model, differentiated service offerings, the value we deliver to our clients and the strength of the management team. Genpact will remain an independent public company, and I, along with our management team, will continue to pursue our strategic objectives,? said NV Tyagarajan, president and CEO, Genpact.
With the closure of the transaction, Bain Capital will name four directors to Genpact?s board to replace the current GA and Oak Hill Capital representatives. However, even after the transaction, GA and Oak Hill Capital will continue to hold 10% equity in Genpact.
Genpact began operations in 1997 as an India-based computer-services unit of General Electric and it still gets more than a quarter of its revenue from GE. The BPO gets almost 25% of its revenues from IT services after it acquired US based IT firm Headstrong last year.
Oak Hill and GA acquired 60% of the company, formerly known as GE Capital International Services or Gecis for $500 million in 2004.
?The two investors have been planning to sell their stake for a few years now and have got a good deal with twice the value. It is a fair deal with Genpact being one of the largest players especially in this muted environment,? said Dipen Shah, head of fundamental research, Kotak Securities.
As part of the transaction, Bain Capital will not sell any Genpact shares for a period of two and a half years, subject to limited exceptions, and has agreed to a customary standstill.
Robert Scott will continue to serve as chairman of the board of Genpact and Tyagarajan will continue to serve as president and CEO.
Morgan Stanley and Citigroup acted as financial advisors to Genpact while Cravath, Swaine & Moore LLP acted as legal counsel. J P Morgan acted as financial advisor to Bain Capital and Ropes & Gray LLP acted as their legal advisor.
